Participating in a disability insurance plan is always an excellent idea as a safeguard against unforeseen circumstances. Nevertheless, we tend to forget that when the time comes for us to try and claim our disability benefits, the disability insurance companies are always extremely reluctant to fork out what is due to us. Quite often, the language that is used in the plan issued by the disability insurance companies contains enough ambiguities and complexities for them to wriggle out of their contractual obligations. A recent opinion rendered by the Court of Appeal in the case of Michael Palmer v Metropolitan Life Insurance Company (MetLife) demonstrated just how this can happen. Although Michael Palmer’s disability attorney did a commendable job in presenting this MetLife disability claim, they lost their case because there was enough leeway contained in the language of the plan which allowed MetLife to terminate Michael Palmer’s disability benefits. Let us examine the case in more detail.
The Background of the Case
In Michael Palmer v Metropolitan Life Insurance Company, the plaintiff Michael Palmer was a Business Solutions Representative for the company Alltel. He participated in a long term disability insurance plan that was issued and administered by MetLife. Under the plan, MetLife agreed that it would pay participants of the plan a monthly benefit when presented with satisfactory proof of a disability that is covered under the plan.
Based on the language of the plan, there were two definitions of what constituted “disability” and each definition carries with it a different level of benefits as well as level of scrutiny by the disability insurance company. The first definition of “disability” defined in the plan provided for inability to perform all material duties of “…your occupation”, the material phrase here being “Your Occupation”. This definition is used to cover for disability benefits that are payable within the first 24 months of one being deemed disabled (after the elimination period).
The second definition of disability is used to determine long term disability benefits that are payable after the initial 24 months of disability benefits had been paid. Under the plan’s second definition, a person is regarded as being disabled if he is unable to perform “any occupation” which he is qualified to perform. The rationale behind this definition is that the disability insurance companies are disinclined to continue paying a person any disability benefits if he able to work in any other substitute occupation.
In Michael Palmer’s case, the long term disability insurance plan that he participated in contained a disqualifying provision for disability benefits not to be paid out by MetLife. Under the plan, MetLife will not pay out any disability benefits if the “…losses were caused by or resulted from a preexisting conditions such as illnesses or injuries that began in the first 12 months of your effective date and for which you received medical treatment, consultation, care or services (including diagnostic measures), or prescription medicines or drugs in the three months prior to your effective date”.
Initial Approval of Disability Benefits Claim
Michael Palmer on February 3rd 2006 underwent a total disc replacement back surgery and on July 11th 2006 filed a claim for long term disability benefits with MetLife. As part of the claim review process, MetLife had to determine whether the claim can be excluded due to “preexisting conditions”. Although MetLife obtained information that Michael Palmer’s claim fell under the plan exclusion provision due to “preexisting conditions”, it nevertheless noted in its internal diary on September 27th 2006 that the “Medical has been reviewed and claim is not pre-ex.” Consequently, Michael Palmer’s claim for disability benefits was approved on October 12th 2006 and payments for the disability benefits commenced on August 2nd 2006.
Review of Michael Palmer’s Disability Status under the 2nd definition of “Disability”
On January 4th 2008, MetLife informed the plaintiff that in order for him to continue receiving disability benefits; he had to satisfy the definition of being disabled for “any occupation”. Michael Palmer, through his Wichita disability lawyer, later on February 8th 2008 informed MetLife that his disability benefits had been underpaid due to a miscalculation. MetLife, instead of resolving this issue first, proceeded on its review of Michael Palmer’s claim based on the second definition of “disabled”.
As part of its review process, MetLife revisited the issue of “preexisting condition”. And during the course of its review and from the medical records voluntarily submitted by Michael Palmer, MetLife discovered that Michael Palmer had suffered from a “preexisting condition” during the initial relevant period. As such, MetLife on March 1st 2008 terminated Michael Palmer’s disability benefits based on the exclusion provision of the plan. Palmer submitted an ERISA appeal and it was denied by Metlife.
Summary of the Court of Appeal’s Opinion
In the lawsuit against MetLife to “recover benefits due to him under the terms of the plan, the plaintiff contended in the District court that the decision by MetLife to terminate his disability benefits was arbitrary and capricious. This was due to “procedural irregularities” on the part of MetLife namely:
- MetLife obtained medical information used for evaluating the plaintiff’s claim in a manner contrary to the plan
- MetLife subsequent determination that the plaintiff was suffering from a “preexisting condition” was beyond the time limits that is mandated by the Employee Retirement Income Security Act (ERISA).
According to the language of the plan, the plaintiff argued that MetLife was only authorized to obtain “current” medical records in its determination to terminate the plaintiff’s disability benefits. The Court of Appeal ruled that the language of the plan only affect MetLife’s right to “obtain” current medical records and do not affect MetLife “usage” of that information once it had been obtained. Because the plaintiff had voluntarily submitted that information to MetLife, the Court of Appeal was of the opinion that the plaintiff had waived all claims that MetLife was unauthorized to obtain the medical records from him.
With regards to the second contention, the Court of appeal stated that the plaintiff’s assumption of MetLife issuing an untimely initial decision on benefits was wrong. The issue at hand here had more to do with the termination of benefits rather than the conferment of benefits. Hence, the ERISA mandated time limits do not apply here.
The Court of Appeal rendered its opinion that even though MetLife had initially made a determination in the plaintiff’s favor with regard to the issue of “preexisting condition”, this did not prevent MetLife from making a second subsequent determination that has the opposite outcome.
The plaintiff in this case was hoping that MetLife would pay him more money each month; however in the end his disability benefits were denied due to his pre-existing condition.